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Sanofi: The Early Bird in Avian Flu

Posted on: Friday, 23 December 2005, 12:00 CST

Sanofi Pasteur is the No. 1 producer of influenza vaccines, with more than 50% of global production capacity. So it's no surprise that Sanofi, a unit of Paris-based pharmaceutical giant Sanofi-Aventis, is leading the pack in the race to develop a vaccine that could help prevent an avian-flu pandemic.

On Dec. 15, Sanofi announced promising results from early clinical trials of a vaccine against the deadly bird-flu virus H5N1. While the trials continue, Sanofi has signed contracts with the governments of France, the U.S., and Australia to produce more than 5 million doses of the vaccine to be stockpiled in case of emergency. It has cranked up production at its French and U.S. factories, and is scheduled to complete delivery of 1.4 million doses to France's Health Ministry by yearend.

Ordinarily, the company wouldn't start mass-producing a vaccine before it had been fully tested. But, says Marie-Jose Quentin-Millet, Sanofi Pasteur's vice-president for research & development: "This isn't business as usual. There's a sense of urgency about this pandemic."

U.S. CONTRACT. Certainly, health authorities are eager to find a way to prevent the spread of bird flu. Until now, the virus has infected only birds and humans who were in close contact with birds. The risk is that it could mutate and begin spreading from human to human.

Tamiflu, an anti-viral drug made by Roche Pharmaceuticals, is approved for treating bird flu, but it isn't a preventive vaccine. GlaxoSmithKline (GSK) of Britain and U.S. biotech Chiron (CHIR), controlled by Switzerland's Novartis (NVS), also are developing vaccines, but Sanofi is further along.

Besides its contract in France, Sanofi has won several U.S. government contracts to produce stockpiles of the vaccine, including a $100 million deal signed in September. It's also getting aid from the U.S. Health & Human Services Dept. to step up the development of new production methods that could be used to ramp up manufacturing quickly in case of a pandemic.

"POISONED CHALICE." Experts, however, caution that bird-flu vaccines are unlikely to be big moneymakers for the pharmaceutical industry. The quantities of vaccine being stockpiled are minuscule compared to what would be needed to head off a global pandemic. What's more, profit margins on government-supply contracts are generally thin, according to a recent report by Wood Mackenzie, an Edinburgh, Scotland-based consultancy to the energy and pharma industries.

Parent company Sanofi-Aventis, which posted a 12.5% rise in operating profits in 2004, to $9.8 billion, on sales of $30.4 billion, said most of that growth was fueled by top-selling non-vaccine drugs such as blood-thinner Lovenox and cancer treatment Eloxatine. The Wood Mackenzie report calls the avian-flu scare a "poisoned chalice" for the drug industry, warning that drug makers would be pilloried if they tried to reap rich profits from a pandemic.

Moreover, the report notes that if a pandemic did break out, drug makers would be unable to churn out enough vaccine quickly enough to immunize everyone. Global production capacity now stands at about 300 million doses, less than what would be required in the U.S. alone.

TRIAL PROCESS. Ordinary seasonal flu vaccines will remain a far more-lucrative business for Sanofi, says Marie-Helene Leopold, a pharmaceutical analyst at SG Cowen in Paris. Demand for traditional flu vaccine is more predictable, since new supplies are ordered for each year's flu season.

Sanofi's flu-vaccine sales last year rose 33%, to $627 million, mainly because of robust growth in the U.S. market. Sanofi Pasteur MSD, a joint venture between Sanofi and Merck (MRK), posted an additional $132 million in flu-vaccine sales in Europe, up 10.2% over 2003. Avian-flu vaccine production, by contrast, "isn't an important commercial activity," Leopold says. "I wouldn't buy Sanofi [shares] for this reason."

For now, Sanofi is pressing ahead with its bird-flu vaccine. The early-trial results released on Dec. 15, based on tests involving 300 people in France, showed the vaccine was safe and effective when given in two doses and combined with a chemical that stimulates the immune system. Second-stage trials could be completed by the end of 2006, Quentin-Millet says.

Sanofi will submit those results to government regulators in an effort to speed up the approval process for mass production in case of a pandemic. The vaccine may never make Sanofi rich -- but if health authorities' worst fears about avian flu come to pass, it could help save millions of lives.

Source: Business Week

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